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HomeMy WebLinkAboutRes 2003-50c c RESOLUTION NO.2003-50 A RESOLUTION OF THE MAYOR AND COUNCIL OF THE TOWN OF FOUNTAIN HILLS,ARIZONA,AMENDING THE TOWN OF FOUNTAIN HILLS FINANCIAL POLICIES BY INCLUDING A SECTION RELATING TO THE TOWN'S DEBT POLICY. WHEREAS,the Mayor and Council of the Town of Fountain Hills (the "Town Council")adopted written financial policies for the Town of Fountain Hills (the "Town")on May 1,2003 (the "Financial Policies");and WHEREAS,the Town Council reserved within the Financial Policies a section relating to a debt policy to be adopted by the Town Council at a later date;and WHEREAS,the Town Council desires to amend the Financial Policies to incorporate the Town's debt policy. NOW,THEREFORE,BE IT RESOLVED BY THE MAYOR AND COUNCIL OF THETOWNOFFOUNTAINHILLS,ARIZONAas follows: SECTION 1.That the "Town of Fountain Hills Financial Policies"is hereby amended to include the debt policy attached hereto as Exhibit A and incorporated herein by reference. SECTION 2.That the Town Manager is hereby authorized and directed to take all steps necessary to ensure that the Town of Fountain Hills Financial Policies are amended and that the debt policy is implemented and applied to the Town's financial management. PASSED AND ADOPTED BY the Mayor and Council of the Town of Fountain Hills, Arizona,August21,20,03. FOR THE TOWN OF FOUNTAIN HILLS: W.J.NictiolS,MW TimG.Pickering,Town Manager 9196 00l\ADebtPolicyresdoc S-14-03-1 ATTESTED TO: )/w^ Bevelyn J.B^hderfTown Clerk APPROVED AS TO FORM: I, Andrew J.McGuire Town Attorney DEBT POLICY The purpose ofthisdebtpolicyistoprovideforthe preservation and enhancement ofthe Town's bond ratings,the maintenance of adequate debt service reserves,compliance with debt instrument covenants and provisions and required disclosures to investors, underwriters and rating agencies.The overall debt management policy of the Town of Fountain Hills is to ensure that financial resources are adequate in any general economic situationtonotprecludethe Town's abilitytopayitsdebtwhendue. These policies are meant to supplement the legal framework of public debt laws provided bythe Arizona Constitution,State Statutes,federaltaxlawsandthe Town's current bond resolutions and covenants.The Arizona Constitution limitsacityortown's bonded debt capacity (outstanding principal)tocertain percentages oftheTown's secondary assessed valuation by the type of project tobe constructed.There isa limit of 20%of secondary assessed valuation for projects involving water,sewer,artificial lighting,parks,open space,and recreational facility improvements.There isa limit of 6%of secondary assessedvaluationforanyothergeneral-purposeproject. General 1.The Town will use current revenues to pay for short-term capital projects,repair and maintenance itemsandwill reserve long-term debtfor capital improvements with useful livesoften(10)years or more.TheTownwillnotuse long-term debt tofundcurrentgovernmentaloperationsandwillmanageitscashina fashion that willpreventanyborrowingtomeetworkingcapitalneeds.However,exclusive reliance upon pay-as-you-go funds for capital improvements requires existing residents topayfor improvements thatwill benefit new residents who relocate to theareaafterthe expenditure is made.Financing capital projects with debt provides foran "intergenerational equity",asthe actual usersofthe capital asset payforitscostovertime,ratherthanonegroupofuserspayingin advance forthe costsofthe asset.Wherethereisa benefit toallfuture residents debt financing should begiven consideration 2.To increase itsrelianceoncurrent revenue to finance its capital improvements, and promote a "pay-as-you-go"philosophy,theTownwill appropriate eachyeara percentageofcurrentrevenuesto maintain aminimum10%ofaverage actual General FundrevenuesfortheprecedingfivefiscalyearsintheDesignated Unreserved Fund. \\earth\JGhetti\WPDATA\Debt Policy.doc Capital Improvement Plan 1.AspartofthebudgetprocesseachyeartheTownwillprepareacapitalspending planthat provides a detailed summary of specific capitalprojectsforthefive fiscalyears subsequent tothefiscalyear presented.Theplanwillincludethe nameoftheproject,project schedule,capitalcostbyfiscalyearanda recommendedspecificfundingsource.Thefiveyearcapitalimprovementplan willbedevelopedwithintheconstraintsofthe Town's abilitytofinancetheplan. 2.TheTown Manager and Department Directors willdevelopformalranking criteriathatwillbeusedinthe evaluation ofallcapitalprojects.Theprogram ranking criteria willgive greatest weighttothoseprojectswhichprotectthehealth and safety of its citizens.Pay-as-you-go project financing shallbegiventhe highestpriority.Capital improvements thatmustrelyupondebt financing shall be accorded a lower priority and projects withausefullife of lessthanfiveyears shall not be eligible for inclusion in bond issues. 3.Lease purchase financing shall only be undertaken whenthe project is considered essential tothe efficient operation of the Town orto remove expenditures that would exceed the State imposed expenditure limitation.The Town Manager or designee shall determine that pay-as-you-go expenditures donot cause thestate imposed expenditure limitation tobe exceeded inanyfiscalyear. 4.All capital project requests willbe accompanied bya description of the sources of funding to cover project costs.Where borrowing is recommended,a dedicated source of fundsto cover debt service requirements must be identified.All capital project requests willbe required to identify any impact the project may haveon future operating costs of the Town.The Town will seek grants to finance capital improvements andwill favor those projects which are likely to receive grant money. 5.All capital project appropriations and amendments tothe capital improvement plan must be approved bythe Town Council. 6.The capital planwill include all equipment and facilities withausefullife of greater thantenyearsandacost greater than $50,000.Debt financing shallnot exceed the useful life of the infrastructure improvement or asset. \\earth\JGhetti\WPDATA\Debt Policy.doc Financing Alternatives 1.Financing alternatives are listed belowbutarenot limited to: a)Grants b)Developer Contributions c)General Obligation Bond -requires voter approval,supported byanad valorem (property)tax d)Revenue Bonds -repaid with revenue stream (HURF,revenue generated by project) e)MunicipalPropertyCorporationBonds-repaidwithadedicatedrevenue source 0CFDor Special District Bonds -supported byanad valorem property tax g)CapitalLeases-repaidwithinoperatingbudget h)CommercialPaper(CP)orBondAnticipationNotes(BAN)withterms lessthantwo years 2.TownDebtServicecosts(GO,RevenueBonds,MPC,Leases)shallnotexceed 20%ofthe Town's operating revenue in order tocontrolfixedcostsandensure expenditure flexibility.Improvement District(ID),Community FacilityDistrict (CFD)and Special District debt service isnot included inthis calculation because itispaidbydistrict property ownersandisnotan obligation ofthe general citizenry.Separate criteria have been established and included within the Town's CFD policy. 3.In accordance with requirements of the State of Arizona Constitution,total bonded debt will not exceed the 20%limitation and 6%limitation of the total secondary assessed valuation of taxable property intheTown. 4.TheTownshallcomplywithallU.S.InternalRevenueServicearbitragerebate requirements for bonded indebtedness. 5.Whereapplicable,theTownwillstructureGeneralObligationbondissuesto createleveldebtservicepaymentsoverthelifeoftheissue.Thegoalwillbeto striveforadebtrepaymentscheduletobenomorethan fifteen (15)years;atno timewillthedebt exceed twenty-five(25)years. 6.Refundingbondswillbemeasuredagainstastandardofthenetpresentvaluedebt servicesavingsexceeding3%ofthedebtserviceamountofthebondsbeing refunded,orifsavingsexceed$750,000,orforthepurposesofmodifying restrictive covenants orto modify the existing debt structure tothe benefit of the Town.Refinancingsundertakenforotherreasonsshouldproceedonlywhenthe advantageshavebeenclearlyshownina cost/benefit analysisofthetransaction. ^p^B^Vf^t^^^oU^ddc • 7.The Town will seek to maintain and,if possible,improve the current bond rating inordertominimizeborrowingcostsandpreserveaccesstocredit. 8.An analysis showing how a new issue combined with current debt impacts the Town's debt capacity and conformance with Town debt policies will accompany every future bondissue proposal.Thedebt capacity analysis should reflect a positive trend and include: a)percentofdebtoutstandingasapercentofthelegaldebtlimit b)measures of thetax and revenue base c)evaluation oftrends relating to expenditures andfundbalance d)debtserviceasa percentage of assessed valuation e)measuresofdebtburdenonthecommunity f)tax-exemptmarketfactorsaffectinginterestcosts g)debt ratios 9.Municipal Property Corporation and contractual debt,whichis non-voter approved,will be utilized only when a dedicated revenue source (e.g.excise taxes)canbeidentifiedtopaydebtserviceexpenses.Theprojecttobe financed will generate net positive revenues (i.e.,the additional revenues generated by the projectwillbegreaterthanthedebtservicerequirements). 10.The Town's privilegetaxtodebtservicegoalwillbearatioofatleast3.5:1to ensure the Town's abilitytopayforlongtermdebtfromthiselasticrevenue source. Issuance of Obligations 1.TheTownshallselecttheUnderwriterandthePayingagent/registrarforeach debtissuancebasedon competitive bid.The underwriter mustbeafirm domiciled in Arizona withanofficeinthe Phoenix areaanda record ofprior working relationships. 2.Therequestfor proposals process willbe designed toselecttheservice providers thatoffertheTownthebestcombinationofexpertiseandprice.TheTownisnot requiredtoselectthefirmofferingthelowestprice,butareportmustbeprepared bythe Town Manager providing justification tothe Town Council fora recommendation when other than the lowest bidder is chosen.The review of all proposalssubmittedshallbetheresponsibilityoftheTownManager. \\carth\JGhetti\WPDATA\Debt Policy.doc \jj^/ c 3.TheTownof Fountain Hillswillusecompetitive sales asthe primary means of selling new General Obligation or revenue bonds that are repaid through ad valorem(property)taxes.Negotiatedsaleswillbepermittedforallotherdebt issues when itis expected toresultina lower true interest costthan would a competitive sale of thatsamedateandstructureorthereis evidence of volatile marketconditions,complexsecurity features,oranotheroverriding factor. 4.The Town Managerordesigneeand Town Attorney willcoordinatetheir activities to ensure that all securities are issued in the most efficient and cost- effective mannerandincompliancewiththe Town's governingstatutesand regulations.TheManagerandthe Town Attorney shall consult and jointly select the bond counsel fora bond issue.The Town Attorney will review all documents relatedtothe issuance of securities by the jurisdiction. 5.TheTownwillseeka rating onallnewissueswhich are beingsoldinthe public market if economically feasible. 6.The Town will reportonanannualbasisallfinancial information and/or notices of materialeventstotheratingagenciesand Nationally-Recognized Municipal SecuritiesInformationRepositories (NRMSIR's).Theannualreportwillinclude butnotbelimitedtothe Town's annual ComprehensiveAnnual Financial Report (CAFR). 7.The Town willrequireany institution orindividual investing monies asanagent forthe Town todosoinamanner consistent andin compliance withthe Town's adopted Investment Policy. 8.The Town will provide detailed draw schedules foranyprojecttobefundedwith borrowed monies.The Town will invest theproceedsordirectatrusteeto invest the proceeds of all borrowings ina manner thatwillensurethe availability of funds as described in the draw schedules. 9.The Town acknowledges the responsibilities of the underwriting community and pledges to make all reasonable efforts to assist underwriters in their efforts to comply with SEC Rule 15c2-12and MSRB Rule G-36.